Plan Termination and Successor Plan Rules

[Alex Daisy]

Company A is being acquired by Company B.

Both of them have an existing 401(k) Plan.

Company A wants to terminate their plan.

Do they need to do this before the official acquisition date in order to not violate the Successor Plan Rules?

If the Plan termination is done after the official acquisition date, what are the consequences?

Does it matter if its a Stock sale or Asset only sale?

Any guidance is greatly appreciated

Alex

[Lou S.]

If it is a stock sale and it is terminated after the stock sale, the assets will need to transfer to the successor B. If it is terminated before the sale, then participants can take distributions.

If it is an asset sale it depends on whether or not Company A retains control of the 401(k) plan or if they "sell it" to company B as part of the sale. If Company A retains it they can then terminate it.

I am not a lawyer but this my general understanding of the rules.

[david rigby]

If it is a stock sale and it is terminated after the stock sale, the assets will need to transfer to the successor B.

I think Lou means to convey that if the plan termination (e.g., corporate Board action to formally terminate the plan) occurs after a stock sale, then the buyer (not the seller) is the company in charge of the plan.